Best Buy earnings top estimates, driven by strong holiday sales

Key Points
  • Best Buy's fourth-quarter results exceeded analysts' expectations, driven by strong sales gains over the holidays.
  • Over the holidays, Best Buy offered next-day delivery on thousands of items with no minimum purchase or membership required.
  • The electronics retailer has grown the tech support side of its business by helping customers install smart home devices and acquiring health-related companies.
A view of a Best Buy retail store on August 29, 2019 in San Bruno, California.
Justin Sullivan | Getty Images

Best Buy on Thursday reported fourth-quarter results that exceeded analysts' expectations, driven by strong sales of headphones, appliances and other items over the holidays.

Shares were down more than 2% amid rising market worries about coronavirus.

CEO Corie Barry said in an earnings call that Best Buy is monitoring the coronavirus outbreak and expects most of its impact to be in the first half of the year.

She said the retailer factored supply chain disruption into its first-quarter and full-year guidance, but "we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives."

Here's what Best Buy reported compared with what analysts were expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share, adjusted: $2.90 vs. $2.75 expected
  • Revenue: $15.2 billion vs. $15.05 billion expected
  • Same-store sales growth: 3.2% vs. 1.9% expected

Barry said in an earnings call that the retailer's growth in the quarter was fueled by sales of headphones, computing, appliance, mobile phones and tablets, helping to offset a decline in gaming. It also saw growth in its in-home consultation and tech support businesses, she said.

"We offer compelling holiday deals that resonated with customers and provided a seamless shopping experience, great inventory availability, and fast free delivery," she said.

In the fourth quarter ended Feb.1, Best Buy said net income grew to $745 million, or $2.84 per share, from $735 million, or $2.69 per share, a year earlier.

Excluding items, Best Buy earned $2.90 per share, which was higher than the $2.75 per share analysts were expecting, according to Refinitiv.

Best Buy said revenue grew to $15.2 billion, from $14.8 billion last year, and was higher than the $15.05 billion analysts expected.

Sales at stores open at least a year rose 3.2%. Analysts were expecting a 1.9% gain.

The retailer's forecast for fiscal 2021 calls for an adjusted earnings range of $6.10 to $6.30 per share and for same-store sales to be flat to up 2%. Revenue will be $43.3 billion to $44.3 billion, the company said.

Analysts surveyed by Refinitiv were calling for Best Buy to earn $6.25 per share on revenue of $44.22 billion in fiscal 2021.

Over the holiday season, Best Buy offered next-day delivery on thousands of items with no minimum purchase or membership required. Customers could pick up products in store within an hour of placing an order.

The retailer also made it possible for shoppers in New York and Chicago to pick up their purchases at 175 alternate pickup locations. In New York, customers could pick up at CVS and UPS and in Chicago at UPS.

Best Buy has expanded the services side of its business as it competes with Amazon on consumer electronics. It has capitalized on the rise of smart home devices by helping customers buy and set them up. For example, it offers Total Tech Support, a $199.99 annual membership program that can help customers install a smart doorbell, mount a TV or troubleshoot a computer glitch.

The retailer has also expanded into health. It acquired three health-related companies, including GreatCall, a connected health and emergency response services provider for senior citizens. It has piloted tech-enabled programs that could reduce health-care costs. And it's hired a practicing emergency medicine physician, Dr. Daniel Grossman, to be its chief medical officer.

Previously, in the third-quarter earnings call, Barry said the company's health offerings are used by about 1 million seniors and the company wants to increase that to 5 million in fiscal 2025.

Best Buy's shares have gained about 36% over the past 12 months, bringing its market value to $21.3 billion.

Read the full press release here.